Efforts to End Patent Licensing and Litigation Abuses Advance

Apr 08, 2014

The U.S. Patent and Trademark Office (PTO) held two public hearings in March on proposed rules designed to increase patent ownership transparency. The hearings, which were held in Alexandria, Virginia, on March 13 and San Francisco, California, on March 26, provided a public forum for input on proposed rules issued by the PTO on January 24 that are driven by so-called patent trolls' abusive licensing and litigation practices in which ownership is obscured and identity hidden. Comments may be sent to AC90.comments@uspto.gov before the public comment period on the proposed rules ends April 24.

The PTO's proposed rulemaking is an effort to implement one of several executive actions the White House issued in June 2013 to increase transparency of patent ownership information. The proposed rule would require patent applicants and owners to define “attributable owner” as a “titleholder,” which the PTO defines as “an entity that has been assigned title to the patent or application,” or an “enforcement entity,” defined as a party “necessary to be joined in a lawsuit in order to have standing to enforce the patent or any patent resulting from the application.”

Each owner would have to be identified, including shareholders or partners of the ultimate parent for all but publicly traded corporations. Those owners also include what the PTO rulemaking states are the “hidden beneficial owners,” or entities “trying to avoid the need for their disclosure by temporarily divesting themselves of ownership rights through contractual or other arrangements.”

The proposed rule has drawn opposition from small inventors who fear that the “attributable owner” requirement will discourage inventors outside the United States, where reporting ownership information may be problematic. On the other hand, startup companies generally support the requirement because it allows them to determine patent ownership without having to hire an attorney.

To complement the Obama administration’s executive actions, the Senate Judiciary Committee on March 27 began consideration of a bill to address patent litigation abuses. The Patent Transparency and Improvements Act (S. 1720), introduced by Sen. Patrick Leahy (D-VT), seeks to help customers that are sued inappropriately for patent violations, by allowing the case against them to be stayed while the product’s manufacturer litigates the suit. The legislation contains a provision to strengthen the “post-grant review” process, which allows parties to challenge patents at the Patent Office after they are issued. The committee is expected to consider additional provisions on fee-shifting (forcing losing parties to pay for the winner’s legal fees) and making it easier to challenge weak software patents. At press time, the committee's work was still ongoing.

The House of Representatives overwhelmingly passed its version of patent reform legislation (H.R. 3309) in December. A significant issue the two chambers will need to resolve is the failure of the House bill to address abusive “demand letter” practices, whereby patent owners send vague or ambiguous letters by the thousands to small businesses, consumers, and Internet application developers, asserting patent infringement, seeking royalty payments, and threatening litigation otherwise.

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